The aftermath of the financial crisis meant that many consumers lost parts of their investments because they had invested their savings in risky financial instruments. Between the years of 2008 and 2009, the Swedish Financial Supervisory Authority, Finansinspektionen, and the Swedish Consumer Agency, Konsumentverket, received more complaints, compared to previous years, regarding financial advisors recommending financial products that failed to meet the actual risk the consumers were prepared to take or to inform about the actual risk of the products.

Today, there are two laws governing the obligations of financial advisors. The first law, lag om finansiell rådgivning till konsumenter (FRL), entered into force on 1 July 2004 and... (More)

The aftermath of the financial crisis meant that many consumers lost parts of their investments because they had invested their savings in risky financial instruments. Between the years of 2008 and 2009, the Swedish Financial Supervisory Authority, Finansinspektionen, and the Swedish Consumer Agency, Konsumentverket, received more complaints, compared to previous years, regarding financial advisors recommending financial products that failed to meet the actual risk the consumers were prepared to take or to inform about the actual risk of the products.

Today, there are two laws governing the obligations of financial advisors. The first law, lag om finansiell rådgivning till konsumenter (FRL), entered into force on 1 July 2004 and regulates the relationship between financial advisors and consumers. The second law, lag om värdepappersmarknaden (VpmL), entered into force on 1 November 2007 as a result of the MiFID Directive and regulates the relationship between financial advisors and professional, non-professional and equal counterparties. FRL is thus no longer applicable for securities firms, fund companies and intermediaries that are now subject to the application of VpmL.

The obligations of a financial advisor according to both laws are essentially:
1. An advisor must have sufficient qualifications.
2. The advice that was given during the meeting with the advisor has to be documented.
3. The customer must be provided with information about the risk and nature of the investment.
4. The adviser must make an assessment of the suitability of the recommendation and the recommendation has to be adapted according to the customer's needs and preferences.

The contents of both laws are more or less the same. With the introduction of VpmL the customer classification was however changed to professional, non-professional investors and equal counterparties instead of the division between a financial advisor and a consumer. The law has also clarified the obligations of the advisors assessment of the suitability of the recommended product and the requirement to obtain necessary information about the customer. Since the companies that give financial advice in accordance with VpmL are now required to have a license for this activity, this has also meant a stronger protection for the investor.

Damages are governed in § 6 FRL, which means that cases decided in court from the period prior to the introduction of VpmL are still actual. In the thesis there is a passage with a number of court decisions about negligent financial advice to detect the factors which in practice has been of importance in determining whether the conduct of a financial adviser has been judged as negligent or not. For damages to be paid the fundamental law principles about damages also has to be met.

The regulators of the two laws are the Swedish Financial Supervisory Authority and the Swedish Consumer Agency that share the responsibility for consumer protection in the financial market.

Of particular interest in the subject is the case of Acta Kapitalförvaltning, which is one of the companies that has been criticized, due to their recommendation of the product Valutaindexobligationer Tillväxtmarknader 1-4. The Swedish National Board for Consumer Complaints, Allmänna reklamationsnämnden, has so far decided in six cases about the product recommended by Acta and has found that Acta has not given negligent financial advice when recommending the product. When taken all factors into account in the case with Acta, there may however be a few points that speak against the recommendations from The Swedish National Board for Consumer Complaints. For example, the product was recommended to clients who demanded a lower risk investment even though the product was considered to have a high risk. Many of Acta’s clients also believe that they did not receive sufficient information about the risks of the investment. Whether the court will decide if Acta’s recommendation of the product is considered to be negligent financial advice or not is yet to be seen and it will be an interesting case to follow in the future. (Less)

@misc{1751482,
abstract = {The aftermath of the financial crisis meant that many consumers lost parts of their investments because they had invested their savings in risky financial instruments. Between the years of 2008 and 2009, the Swedish Financial Supervisory Authority, Finansinspektionen, and the Swedish Consumer Agency, Konsumentverket, received more complaints, compared to previous years, regarding financial advisors recommending financial products that failed to meet the actual risk the consumers were prepared to take or to inform about the actual risk of the products.
Today, there are two laws governing the obligations of financial advisors. The first law, lag om finansiell rådgivning till konsumenter (FRL), entered into force on 1 July 2004 and regulates the relationship between financial advisors and consumers. The second law, lag om värdepappersmarknaden (VpmL), entered into force on 1 November 2007 as a result of the MiFID Directive and regulates the relationship between financial advisors and professional, non-professional and equal counterparties. FRL is thus no longer applicable for securities firms, fund companies and intermediaries that are now subject to the application of VpmL.
The obligations of a financial advisor according to both laws are essentially:
1. An advisor must have sufficient qualifications.
2. The advice that was given during the meeting with the advisor has to be documented.
3. The customer must be provided with information about the risk and nature of the investment.
4. The adviser must make an assessment of the suitability of the recommendation and the recommendation has to be adapted according to the customer's needs and preferences.
The contents of both laws are more or less the same. With the introduction of VpmL the customer classification was however changed to professional, non-professional investors and equal counterparties instead of the division between a financial advisor and a consumer. The law has also clarified the obligations of the advisors assessment of the suitability of the recommended product and the requirement to obtain necessary information about the customer. Since the companies that give financial advice in accordance with VpmL are now required to have a license for this activity, this has also meant a stronger protection for the investor.
Damages are governed in § 6 FRL, which means that cases decided in court from the period prior to the introduction of VpmL are still actual. In the thesis there is a passage with a number of court decisions about negligent financial advice to detect the factors which in practice has been of importance in determining whether the conduct of a financial adviser has been judged as negligent or not. For damages to be paid the fundamental law principles about damages also has to be met.
The regulators of the two laws are the Swedish Financial Supervisory Authority and the Swedish Consumer Agency that share the responsibility for consumer protection in the financial market.
Of particular interest in the subject is the case of Acta Kapitalförvaltning, which is one of the companies that has been criticized, due to their recommendation of the product Valutaindexobligationer Tillväxtmarknader 1-4. The Swedish National Board for Consumer Complaints, Allmänna reklamationsnämnden, has so far decided in six cases about the product recommended by Acta and has found that Acta has not given negligent financial advice when recommending the product. When taken all factors into account in the case with Acta, there may however be a few points that speak against the recommendations from The Swedish National Board for Consumer Complaints. For example, the product was recommended to clients who demanded a lower risk investment even though the product was considered to have a high risk. Many of Acta’s clients also believe that they did not receive sufficient information about the risks of the investment. Whether the court will decide if Acta’s recommendation of the product is considered to be negligent financial advice or not is yet to be seen and it will be an interesting case to follow in the future.},
author = {Belovai, Ewa},
keyword = {Förmögenhetsrätt},
language = {swe},
note = {Student Paper},
title = {Vårdslös rådgivning – Vad innebär vårdslös rådgivning vid finansiell rådgivning samt investeringsrådgivning?},
year = {2011},
}